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November 10, 2010

The Honorable Timothy F. Geithner The Honorable Shaun Donovan


Secretary Secretary
U.S. Department of the Treasury U.S. Department of Housing and Urban Development
1500 Pennsylvania Avenue, NW 451 Seventh Street, SW
Washington, DC 20220 Washington, DC 20410

The Honorable Ben Bernanke


Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Dear Secretary Geithner, Secretary Donovan and Chairman Bernanke:

The undersigned trade associations, representing the real estate finance industry, appreciate the Board’s
and HUD’s efforts to improve disclosures to mortgage borrowers under the Truth in Lending Act (TILA)
and Real Estate Settlement Procedures Act (RESPA). At this point, however, Special Advisor to the
President Elizabeth Warren and Treasury staff have begun discussions internally and with stakeholders
to combine the two disclosures into a single, integrated disclosure, and we understand that effort will be a
first priority of the new Bureau of Consumer Financial Protection (Bureau).

Every segment of the financial services industry shares the objective of doing something “exceptional” to
improve the mortgage disclosure process for consumers and we fully support this important work. Both
disclosures are provided to borrowers throughout the mortgage process and integrating them will greatly
increase transparency and consumer understanding of the mortgage transaction.

Notwithstanding, it is important to recognize that this vital initiative is being undertaken in the midst of a
surfeit of proposed and final regulations that require fundamental changes to the mortgage finance
business model and a generation of systems which support it.

Major changes under TILA, including HOEPA revisions, and new loan officer compensation rules, along
with new RESPA disclosures, SAFE Act compliance and appraisal standards, to name a few, have
stretched thin the compliance capabilities of financial institutions. If these efforts are not coordinated
going forward, the cumulative regulatory burden will threaten the availability of housing finance options.

Likewise, these initiatives have stretched the abilities of stakeholders to consider proposals and provide
needed input. The numerous rules recently issued by the Board and other agencies are listed in
Attachment A. Many more are to come under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (DFA).

Accordingly, while we believe disclosure improvement should be the first priority, considering these other
imperatives and the need to assure energies are directed to this important effort, we believe it is essential
that all federal regulatory efforts to establish new mortgage disclosure requirements under RESPA and
TILA and DFA be accomplished in an orderly and coordinated manner.

To this end, we urge you to work with Professor Warren, and subsequently the Bureau Director, to
develop a comprehensive plan for disclosure reform that includes an agenda and timetable to propose,
finalize and implement all mortgage disclosure revisions by the Board, Bureau and other agencies in an
orderly manner.


 
The plan should establish RESPA-TILA integration as a first priority and assure that other rules to
improve mortgage disclosures complement that effort. Accordingly, we believe efforts of individual
agencies, including the Board’s to improve TILA disclosures, at this point should be rescheduled
to later in the process, to avoid diverting the efforts of stakeholders into what may become a
fruitless pursuit and/or confusing the joint RESPA-TILA simplification effort itself. Moreover, to
maximize public involvement, we believe the plan should be made public so stakeholders can
appropriately allocate their resources.

Integration of RESPA and TILA Disclosures Should Indeed Be the First Priority
Our industry knows too well that consumers are inundated with countless ill-timed, uncoordinated and
confusing disclosures during the mortgage process, which, as a result, are often ignored despite their
importance. Both independent and governmental studies confirm that consumers are confused, and may
even be misled, by the array of required forms. For nearly two decades, mortgage lenders and their trade
associations have advocated a comprehensive overhaul of the mortgage disclosure process generally
and joint RESPA -TILA reform in particular.

We believe that if the TILA and RESPA disclosures were made truly simpler and combined, or at least
made harmonious and complementary – and if they and other essential information were provided to
consumers in a coordinated manner at rational times in the process – consumers would be far better
equipped to navigate the market, understand their mortgage and settlement costs, and shop intelligently
to meet their financing needs.

We believe improving the transparency of the process is essential to true reform and needs to be the first
stage of the reform process. The way should be cleared for stakeholders to channel their energies into
this effort to facilitate its successful achievement.

Assuming that RESPA and TILA integration is accomplished, the next important step would be to simplify
the many other disclosures, which add to the confusion, so that they too complement the RESPA and
TILA disclosures and do not in any way detract from consumer understanding.

Separate Reform Efforts Paved with Good Intentions Have Yielded Suboptimal
Results
A key purpose of DFA in establishing the new Bureau was to create a coordinated consumer protection
effort by putting all consumer financial protection efforts in one place. Regrettably, the urgent need for
coordination has been demonstrated all too well.

During the last few years, the Board and HUD, with the best of intentions, initiated separate efforts to
improve disclosures under their respective laws that have resulted in new RESPA disclosures, additional
TILA rules and several TILA proposals for reform. The results thus far have yielded complex, confusing
and even conflicting requirements and very considerable costs. 1 Congress added to the confusion in
2008 by establishing new timing requirements for TILA disclosures, which differ from the timing of RESPA
disclosures. These differences were exacerbated by additional timing requirements for redisclosure of
the GFE under the new RESPA rule, and proposals pending in Congress are a concern.

In early 2008, HUD proposed its overhaul of the Good Faith Estimate (GFE) and HUD-1 Settlement
Statement. It finalized the rule in November of 2008, and the regulations became effective January 1 of
this year, with clarifying issuances that continue to this day. These new regulations establish substantive
and procedural requirements that vary from those proposed by the Board. Untold implementation
expenses have been and continue to be incurred by the lending industry.

1
A recent example of overlapping and problematic TILA and RESPA requirements is the new Interim Final Regulation (MDIA)
issued by the Board of Governors of the Federal Reserve System (Board). This rule will require disclosure of a new Interest Rate
and Payment Summary form to show how an interest rate or payment amount may change. We agree disclosure of that information
is important, but the new disclosure form repeats information that is already required to be disclosed on the GFE and HUD-1 under
the new RESPA rule, but on a different form.

 
In the summer of 2009, after issuing rules to protect consumers from unfair, abusive, or deceptive lending
and servicing practices, as well as accompanying changes to the Home Mortgage Disclosure Act
(Regulation C), the Board separately proposed a complete overhaul of many of its TILA disclosures for
closed-end and open-end transactions and required comments by December 24, 2009. Although
provisions of the Board’s proposal concerning loan officer compensation have been finalized, the
disclosure provisions have not been finalized yet, making this an appropriate time to bring this effort into
the RESPA-TILA integration process.

On September 24 of this year, the Board issued a second set of proposals of nearly 1,000 pages to
further amend its TILA rules. These proposals, among other things, would revise disclosures for reverse
mortgages, amend the rules for rescission of open-end and closed-end loans secured by consumers’
principal dwellings, and add restrictions regarding unfair acts or practices.

Like the 2008 proposal, the Board’s current proposal is requiring extensive review and an enormous
investment of time by stakeholders to comment, diverting energy that would be better spent on RESPA-
TILA integration. Although these proposals provide useful spadework that can help set the stage for
future action, they may also be revised considerably as a result of the integration effort. Considering
that comments are due December 23, and that to comment effectively the proposed changes must
be considered in light of the RESPA-TILA proposals to come, a public announcement of
postponement is warranted. The disclosure provisions could and should await the RESPA-TILA
integration process.

Conclusion
In summary, we believe a comprehensive and orderly approach to mortgage reform is the only way to
make certain that the RESPA-TILA integration process is successful. This will necessitate moving certain
efforts of the Board and others to later in the process. Without a coordinated approach, we are
concerned that piecemeal reform will continue until after the new Bureau takes over next summer.

We appreciate your consideration of this important issue and we look forward to assisting in the
development of a coordinated plan to foster the reform effort in any way we can.

Thank you again for your efforts and your leadership.

With best regards,

American Bankers Association


American Financial Services Association
Community Mortgage Banking Project
Consumer Bankers Association
Consumer Mortgage Coalition
Housing Policy Council
Independent Community Bankers of America
Mortgage Bankers Association


 
Attachment A

Rule Publication Date Compliance Date


Interest Rate and Payment Summary, 75 Fed. Reg. January 30, 2011
Interim Final Rule. This requires a new 58470 (Sept. 24,
disclosure form that repeats, in a 2010)
different format, information already
disclosed in a GFE.
Loan originator compensation. This 75 Fed. Reg. April 1, 2001
rule revises the method for determining 58509 (Sept. 24,
loan originator compensation. 2010)
Final rule requiring notice to 75 Fed. Reg. January 1, 2011
consumers when a loan is transferred. 58489 (Sept. 24,
2010)
Comprehensive rule changes for 75 Fed. Reg. Proposal
closed-end loans. This proposal would 58539 (Sept. 24,
require a number of new or revised 2010)
disclosures.
This rule would implement a statutory 75 Fed. Reg. Proposal. Board
requirement mandating escrows on 58505 (Sept. 24, expects a final rule
certain jumbo loans. 2010) shortly after the
public comment
period closes.
SAFE Act registration of mortgage loan 75 Fed. Reg. October 1, 2010.
originators. 44656 (July 28, Registration within
2010) 180 days of
Registry accepting
registrations.
CRA definition of community 75 Fed. Reg. Proposal
development. 36016 (June 24,
2010)
Risk-based pricing notices. 75 Fed. Reg. January 1, 2011
2724 (January
15, 2010)
Consumer financial privacy notice 74 Fed. Reg. Primarily
62890 (December December 31,
1, 2009) 2009
Interim final rule requiring notice to 74 Fed. Reg. January 19, 2010
consumers when a loan is transferred. 60143 (November
20, 2009)
TILA – closed end, proposing major 74 Fed. Reg. Proposal
changes and several new disclosures. 43232 (August
26, 2009)
TILA – open end, proposing major 74 Fed. Reg. Proposal
changes and several new disclosures. 43428 (August
26, 2009)
Release of RESPA FAQs began Released Largely January 1,
piecemeal

 
between August 2010
13, 2009 and
April 2, 2010
Information furnished to consumer 74 Fed. Reg. July 1, 2010
reporting agencies 31484 (July 1,
2009)
Information furnished to consumer 74 Fed. Reg. ANPR
reporting agencies 31529 (July 1,
2009)
CRA rules 74 Fed. Reg. Proposal
31209 (June 30,
2009)
SAFE Act registration 74 Fed. Reg. Proposal
27386 (June 9,
2010)
TILA / MDIA rules on, in part, timing of May 19, 2009 July 30, 2009
disclosures and mandatory waiting
periods.
Affiliate marketing and ID theft red May 14, 2009 May 14, 2009 and
flags January 1, 2010
TILA-MDIA 73 Fed. Reg. Proposal
74989 (December
10, 2008)
Major RESPA rules 73 Fed. Reg. Mostly January 1,
68204 (November 2010
17, 2008)
HMDA rate spread reporting 73 Fed. Reg. October 1, 2009
63329 (October
24, 2008)
Major TILA / HOEPA rules 73 Fed. Reg. October 1, 2009
44522 (July 30, (April 1, 2010 for
2008) § 226.35(b)(3))
HMDA, conforming to higher-priced 73 Fed. Reg. Proposal
loan definition 44189 (July 30,
2008)
Risk-based pricing 73 Fed. Reg. Proposal
28966 (May 19,
2008)
Higher-priced mortgage loans 73 Fed. Reg. Proposal
1672 (January 9,
2008)
Mortgage assistance relief services 75 Fed. Reg. Proposal
10707 (March 1,
2010)
Mortgage advertising 75 Fed. Reg. Proposal
60352 (Sept. 30,
2010)

 
Mortgage assistance relief services 74 Fed. Reg. ANPR
26130 (June 1,
2009)
Mortgage advertising, origination, 74 Fed. Reg. ANPR
appraisals and servicing. 26118 (June 1,
2009)